A storm is coming and if you are not preparing, then you are deluding yourself.
This is an economic storm like nothing we have seen before.
In 2007, the economy sank like a rock. There were several reasons for this economic collapse. It started with the media generally refers to as the “great recession.” The next recession or depression will be so large, the “great recession” will pale in comparison.
If you get a dozen economists in a room, you will end up with a dozen opinions. But there are signs that we cannot ignore. American debt is out of control. It isn’t just the government that has record debt.
Yes, the government does have record debt. And now the costs of that debt, due to rising interest rates, is taking a bite out of the federal budget. The interest payments on the debt (all the government actually pays), will exceed defense spending in 2023. Next year, they will exceed Medicare spending.
All of that assumes there is no major rise in interest rates. If there are, those dates will come sooner.
American businesses now carry record debt as do American consumers.
Where does this end?
At some point, the economy will slow down again. And when it does, we will see an economic collapse. As the economy slows, companies and individuals will not be able to make their debt payments and will default. It will ripple through the economy, as it did through the housing market in 2007 and 2008.
The obvious question everyone asks is, when is the next economic downturn?
My personal prediction is about four years from now. Economic downturns seem to hit in the last two years of a President’s second term (and I assume President Trump will be reelected).
The good news is, there is still time to prepare.
There are several things you can do. The obvious is, get out of debt. Eliminate consumer debt, eliminate business debt and try to save. Those who are not servicing debt will be in a better position to weather the next economic storm.
If you are a baby boomer, don’t retire. Every day, ten thousand baby boomers retire. Pension systems in the United States are grossly underfunded and when this next economic storm comes, a number of them will fail.
Finally, consider the skills you have and whether or not there will be a strong demand for them, even if the economy is weak. Some skills, such as STEM, are always in demand. If you had trouble finding a job during the last great recession, this one is going to be much worse. You have time to prepare for the storm.
Unfortunately, the era of a strong American economy is coming to an end. The signs are all there, if anyone is paying attention. Or, to quote one of the characters from Game of Thrones, “If you think this has a happy ending, you haven’t been paying attention.”